2025 H2 Economics Paper 2 Essay 4: Suggested Answers
How to use these essay answers. The responses below, including the part (a) answer, are structured guides to the requirements of the question, the content, analysis and evaluation a strong answer must cover, rather than full essay prose with a written introduction and conclusion. Use them to see what to include and how to build the argument, then write it up in your own continuous prose, adding your own introduction and conclusion.
This essay explains how the removal of an import tariff might redistribute welfare between economic agents and improve resource allocation, then asks for the benefits and unintended consequences of protectionist measures and whether large economies should impose them.
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Explain how the removal of an import tariff by a country might redistribute welfare between its economic agents and improve resource allocation.
When an import tariff is removed, the domestic price of the good falls from the tariff inclusive price (Pw plus t) back to the world price (Pw), assuming the country is a price taker in the world market. This redistributes welfare among consumers, producers and the government, and improves allocative efficiency. On a standard tariff diagram, domestic supply and demand cross the horizontal world price line, and the tariff sits as a higher horizontal line above it.
Redistribution of welfare. Before removal, consumers face the higher price Pw plus t, which restricts consumption. When the tariff is removed and price falls to Pw, the good becomes cheaper and consumption expands, so consumer surplus increases significantly. Consumers are the main beneficiaries because they pay lower prices and consume more. Domestic producers lose: at the higher tariff inclusive price they supplied more, but when price falls to the world price their output contracts as they are less competitive than foreign producers, so producer surplus shrinks. The government also loses the tariff revenue it previously earned, equal to the tariff per unit times the volume of imports, which disappears entirely once the tariff is removed. Overall, welfare is redistributed away from producers and the government towards consumers, who gain the most.
Improvement in resource allocation and total welfare. Beyond redistribution, removing the tariff improves allocative efficiency. Under free trade at Pw, goods are supplied by the lowest cost global producers, so resources are allocated according to comparative advantage. The production distortion is eliminated, as domestic producers no longer over produce high cost units that are inefficient relative to foreign production. The consumption distortion is also removed, as consumers previously priced out, despite valuing the good more than its world cost, can consume again. The deadweight loss triangles that represented lost mutually beneficial trades under the tariff are eliminated. Although the government loses revenue and producers lose surplus, the gain in consumer surplus exceeds these losses.
Hence, removing an import tariff not only redistributes welfare towards consumers but also raises overall societal welfare.
Trace the price fall to Pw, allocate the surplus changes across consumers, producers and government, and show the deadweight loss triangles being eliminated for a net welfare gain.
Tests: Protectionism, Comparative advantage
Discuss the benefits and unintended consequences of imposing protectionist measures and consider whether large economies should impose such measures.
- Frame protectionism as offering short run gains against longer run costs, and signpost the agents affected.
- Develop the intended benefits, namely an improved trade balance and a stimulus to domestic output and employment.
- Develop the unintended consequences for consumers and for downstream, input using industries.
- Bring in the large economy dimension, including the risk of retaliation and the loss of long run allocative efficiency.
- Weigh a residual advantage such as tariff revenue against its sustainability.
- Reach an evaluative conclusion on whether large economies should impose such measures and on what terms.
This part is gated. The full model answer with the worked ad and as analysis and the evaluation, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
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Where can I get the full worked answers to the 2025 H2 Economics paper 2 essay 4?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2025 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How should I use these suggested essay answers?
Treat them as a guide to the requirements of the question, the content, analysis and evaluation a strong answer must cover, not as full essay prose. Write the essay up in your own continuous prose, with your own introduction and conclusion.
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